Investment accounts hold stocks, bonds, mutual funds, and the like for individuals, trusts, corporations, and other investors. Investors typically utilize such accounts to achieve long and short term savings goals and as an aid in tax planning. The holdings of an investment account may be manipulated by the investor, such as by an investor executing securities purchases or sales via a graphical user interface and an Internet connection. An investor can be any of a number of different types of entities, including an individual or a business. The holdings of an investment account may also be manipulated by an entity managing or otherwise associated with the investment account, such as a money manager, a brokerage firm (sometimes referred to as a broker-dealer or a sponsor), or some other type of investment firm.
In managing investment account transactions, oftentimes restrictions are established that constrain the ability to use an investment account to trade security instruments, such as buying or selling stocks. For instance, a restriction might stipulate that no more than twenty percent of the total portfolio value of an investment account consist of stock holdings in the telecom industry, or that stock in a particular entity should never drop below ten percent of the total holdings of an investment account. In conventional securities trading systems, applicable restrictions are identified and examined when a set of trades are generated as a result of human investment decisions or automated system functions (e.g., rebalancing). A restriction may prevent one or more trades and may be associated with a resolution rule that stipulates an alternative action that should be performed when the restriction is violated.
Restrictions can be established by a money manager, investor, and/or the entity establishing the investment account (e.g., a broker-dealer or other client of the money manager), and can be scoped in different ways. For example, a restriction can apply to a single account, all accounts associated with a particular money manager, all accounts managed under a specific style, all accounts associated with a particular program offered to investors, or all accounts associated with a particular client of the money manager. Additionally, restrictions may be established or modified at any point in time, including before an initial allocation of assets, after an initial allocation, or even after one or more rebalancings. Additional information on restrictions and systems in which they are implemented is disclosed in U.S. application Ser. No. 11/146,045 titled “Automated Actions Based on Restrictions”, filed Jun. 7, 2005, the entire contents of which are incorporated herein by reference as if set forth fully herein.
It will be appreciated that restrictions can fall into one of two categories. The first restriction category, security restrictions, include those restrictions whose violation determination is unaffected by other simultaneous trade orders for the same investment account. These are generally based on a static field as opposed to a field that can fluctuate based on the results of other trades. Illustrative examples of security restrictions include:                Do not buy if “ticker” equals “IBM”        Do not buy if “internal rating” is less that “3 stars”        Do not sell if “maturity date” is past “Jan. 01, 2007”        Do not buy if “industry sector” is “Telecom”.        
The second type of restriction is a trading or cash restriction. A trading or cash restriction is a restriction whose violation determination may be affected by other simultaneous trade orders for the same account. These are generally based on a factor that fluctuates as a result of the trades. Many times these restrictions will involve percentage comparisons or absolute dollar values. Illustrative examples of trading or cash restrictions include:                Do not buy if “% of account in Telecom sector” is greater than “30%”        Do not sell if “% of account in fixed income securities” is less than “20%”        Do not buy if “% of account held in cash” is less than “20%”        Do not sell if “$ value of account held in cash” is greater than “$50,000”.        
Prior art systems did not distinguish between the above two restriction types. Prior art systems simply received a list of pending trade orders to be executed and iterated through each pending order, determining whether it passed the applicable restriction criteria, and either executing or canceling the pending trade order accordingly. Such systems often operated correctly only if all applicable restrictions were static. However, for trading or cash restrictions impacted by the cumulative effect of multiple trade orders, prior art system results are less satisfactory—some trade orders are rejected that would otherwise be allowed if later processed trade orders are taken under consideration.
In the following illustrative example of a prior art system in which restrictions are processed, each trade order to be executed is individually evaluated against applicable restrictions with no consideration of the effect of other simultaneous trade orders. Assume, for instance, an account having a total market value of $101,733.70 and the following asset allocation:
TABLE 1Illustrative Investment Account AllocationAsset# ofMarket% ofSecurity/CashClassUnitsPrice/UnitValueTMVCKFREquity380$50.2500$19,095.0018.77%IBMEquity250$88.3400$22,085.0021.71%POM-18Fixed25,000 $1.0084$25,210.0024.78%IncomeCVX-D5Fixed14,000 $1.0068$14,095.2013.85%IncomeCashCash——$21,248.5020.89%TOTAL$101,733.70 100.00%
To illustrate the shortfalls of prior art systems, assume a trading tool has generated the following three trade orders for sequential execution using the investment account of Table 1:
(1) Sell 112 shares of CKFR at $50.25/share. The market value of this trade order would be $5,268.00, which is 5.532% of the total market value of the illustrative investment account of Table 1.
(2) Buy 188 shares of MSFT at $25.02/share. The market value of this trade order would be $4,703.76, which is 4.624% of the total market value of the illustrative investment account of Table 1.
(3) Buy 10 shares of IBM at $88.34/share. The market value of this trade order would be $883.40, which is 0.868% of the total market value of the illustrative investment account of Table 1.
Further, assume the following three restrictions are identified as applicable to the above trade orders:
(A) Don't buy or sell if “Cash” is less than or equal to “18%”;
(B) Don't buy or sell if “% of account in Equity asset class” is greater than “45%”
(C) Don't buy or sell if “% of account in Equity asset class” is less than “35%”.
In a prior art system, the three trades (1)-(3) are each examined sequentially (and independently) against the three restrictions (A)-(C). The first trade (1) is processed but is rejected because of the third restriction (C); selling 112 shares of CKFR would drop the percentage of the account in the ‘Equity’ asset class (which initially is 40.48%, or 18.77%+21.71%) to 34.948%, which is less than the minimum of 35% stipulated by restriction (C). The system would next attempt to process the second trade (2). That trade is likewise rejected because restrictions (A) and (B) would be violated; buying 188 shares of MSFT would increase the percentage of the account in the ‘Equity’ asset class to 45.104% (40.48%+4.624%), which is more than the maximum of 45% stipulated by the second restriction (B). Additionally, ‘Cash’ would be reduced to $16,544.74, which, at 16.26% of the total market value of the account, is less than the 18% stipulated by the first restriction (A). Only after the rejection of the first two trades will the third and final trade (3) be processed. Unlike the other two trades in this illustrative example, this trade is executed, as the resulting ‘Cash’ percentage (20.02%) is not below the stipulated minimum percentage (18%), and the resulting ‘Equity’ asset class percentage (41.35%) remains in the appropriate range (35-45%) when the trade is executed. Thus, in the above example, only one of the three trades would be executed because the trades are considered independently and sequentially.
However, it will be appreciated that the three trade orders (1)-(3) are offsetting such that if they are considered together, they could all be executed without violating any of the restrictions (A)-(C). If all three trades are executed, the following asset allocation would result:
TABLE 2Illustrative Investment Account AllocationAfter Execution of TradesAsset# ofMarket% ofSecurity/CashClassUnitsPrice/UnitValueTMVCKFREquity268$50.2500$13,467.0013.24%IBMEquity260$88.3400 22,968.4022.58%MSFTEquity188$25.02  $4,703.764.62%POM-18Fixed25,000 $1.0084$25,210.0024.78%IncomeCVX-D5Fixed14,000 $1.0068$14,095.2013.85%IncomeCashCash——$21,289.3420.93%TOTAL$101,733.70 100.00%As shown in the above table, if all three trades are executed, the total percentage in the ‘Equity’ asset class would be 40.44% and the percentage in ‘Cash’ would be 20.93%. None of these results violate any of the restrictions (A)-(C). In stark contrast to the rejection of one or more trades based on restriction violations resulting from their sequential consideration, execution of all the trades will not result in violation of any of the restrictions.
It will be appreciated that it would be desirable for restriction processing to reduce, if not eliminate, the inappropriate rejections of trades that should otherwise be permitted when considered in combination with one or more other trades.